The case concerned four directors of Lancer Property Asset Management (Lancer).They were to transfer to a company called Astrea Asset Management Ltd (Astrea).
Relevant legislation provides that any purported variation of the employment contract of a transferring employee shall be void if the sole or principle reason for the variation is the transfer itself, or because of a transfer-related reason that is not economic, technical or organisational and entails changes in the workforce.
Prior to their transfer to Astrea, the Lancer directors amended their employment contracts to include more favourable terms, such as a guaranteed yearly bonus worth half of their salary, a longer notice period, and a termination payment connected to their length of service.
Following the transfer, the directors were dismissed by Astrea for gross misconduct and they commenced Employment Tribunal (“ET”) proceedings against the company. These included claims for the termination payments that had been introduced by the directors’ variation to their employment contracts.
In light of the relevant legislation mentioned above and the EU’s abuse of law principle, the ET judge found the contractual variations to be void. The directors had dishonestly taken advantage of the law, knowing that Astrea would be paying for their more favourable contractual terms.
The directors appealed, and the case went to the Employment Appeal Tribunal. Her Honour Judge Shanks held that the legislation, interpreted in line with EU law, meant that all contractual changes made because of the transfer were void. The fact that they were beneficial, did not change this. In the alternative, the EU’s abuse of law principle rendered the contractual variations invalid. Thus, the directors could not rely on the varied terms against Astrea.
